Potash reports EPS in-line, beats on revs; guides Q2 EPS below consensus; guides FY16 EPS below consensus
- Reports Q1 (Mar) earnings of $0.15 per share, excluding non-recurring items, in-line with the Capital IQ Consensus of $0.15; revenues fell 27.4% year/year to $1.21 bln vs the $1.1 bln Capital IQ Consensus.
- Co issues downside guidance for Q2, sees EPS of $0.15-0.25 vs. $0.29 Capital IQ Consensus Estimate.
- Co issues downside guidance for FY16, sees EPS of $0.60-0.80 vs. $0.92 Capital IQ Consensus Estimate.
- "In response to weaker demand, we curtailed production and have lowered our expectations for 2016 potash sales volumes to a range of 8.3-8.8 million tonnes. The combination of lower volumes and weaker prices -- reflecting the decline during the first quarter -- has reduced expectations for our full-year potash gross margin, which is now forecast at $0.5-$0.7 billion. Similarly challenging market conditions have caused us to lower our combined nitrogen and phosphate gross margin guidance to a range of $0.6-$0.8 billion in 2016."
- Weaker prices -- primarily for potash and nitrogen -- and lower offshore potash sales volumes negatively impacted performance for the quarter, with gross margin of $234 million, cash provided by operating activities of $188 million and earnings before finance costs, income taxes, depreciation and amortization, termination benefit costs and certain impairment charges (adjusted EBITDA) of $385 million, all well below 2015's respective totals.
- The absence of new contracts in China, limited demand from India and cautious buying patterns in spot markets reduced global potash deliveries in the first quarter. This weaker demand environment, combined with increased competitive pressures, pushed spot prices lower -- most notably in North America -- although they stabilized late in the quarter as signs of strengthening demand began to emerge ahead of the key application season.
- Lower global energy costs and new nitrogen capacity pressured prices for all nitrogen products, keeping them below those realized in first-quarter 2015, although urea and UAN prices displayed seasonal strength in the US as buyers prepared for the spring planting season.